Correlation Between IShares Global and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both IShares Global and Australian Agricultural at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Global and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Healthcare and Australian Agricultural, you can compare the effects of market volatilities on IShares Global and Australian Agricultural and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Global with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Australian Agricultural.
Diversification Opportunities for IShares Global and Australian Agricultural
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and Australian is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and IShares Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Global Healthcare are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of IShares Global i.e., IShares Global and Australian Agricultural go up and down completely randomly.
Pair Corralation between IShares Global and Australian Agricultural
Assuming the 90 days trading horizon iShares Global Healthcare is expected to generate 1.52 times more return on investment than Australian Agricultural. However, IShares Global is 1.52 times more volatile than Australian Agricultural. It trades about 0.16 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.23 per unit of risk. If you would invest 13,640 in iShares Global Healthcare on October 23, 2024 and sell it today you would earn a total of 302.00 from holding iShares Global Healthcare or generate 2.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
iShares Global Healthcare vs. Australian Agricultural
Performance |
| Timeline |
| iShares Global Healthcare |
| Australian Agricultural |
IShares Global and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and Australian Agricultural
The main advantage of trading using opposite IShares Global and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, Australian Agricultural can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| IShares Global vs. iShares MSCI Emerging | IShares Global vs. iShares Global Aggregate | IShares Global vs. iShares CoreSP MidCap | IShares Global vs. iShares SP 500 |
| Australian Agricultural vs. Ecofibre | Australian Agricultural vs. iShares Global Healthcare | Australian Agricultural vs. Australian Dairy Farms | Australian Agricultural vs. Adriatic Metals Plc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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